California DFS Bill Sails Through House Committee as Momentum Grows for Regulation

Posted on: January 27, 2016, 02:01h. 

Last updated on: January 27, 2016, 02:01h.

California DFS bill sails through committee
Adam Gray’s DFS bill AB 1437 calls for the licensing and taxation of the fantasy sports industry and the establishment of a framework for consumer protection. (Image: sacbee.com)

A California DFS bill that would regulate and tax the daily fantasy sports industry in the Golden State has sailed through the state legislature’s House Appropriations Committee by a unanimous vote of 15-0.

Assemblyman Adam Gray’s Internet Fantasy Sports Games Consumer Protection Act (AB 1437) proposes a framework of regulation for DFS that would establish a set of best practices for the industry, as well as consumer protections.

Should they meet the licensing requirements, operators would have to pay a one-time, as-yet-unspecified licensing fee, as well as an annual regulatory fee. The latter will go into a newly established Fantasy Sports Fund, which will pay for the costs of licensing oversight, consumer protection, state regulation, and other purposes related to the bill.

AB 1437 would also ensure that the contests were fair by prohibiting DFS industry employees and their family members from participating. And it would demand that operators segregate player funds and promote responsible gambling.

Players Assume Risk

Gray has said his bill will “ensure consumers are playing on websites that provide comprehensive consumer protections.”

“Californians participate in Internet fantasy sports games on a daily basis on unregulated Internet Web sites,” states the bill.

“Neither federal nor California laws provide any consumer protections for California players. California players assume all risks, any negative social or financial impacts are borne by the citizens of California, and the revenues generated from these games are being realized by unlicensed operators and do not provide any benefits to the citizens of California.”

“To better protect the people of California from potential risks from, and to maintain oversight of the systems used to carry out, Internet fantasy sports games, the Legislature finds it to be in the interest of the people to establish a regulatory framework by which entities, as authorized by the Department of Justice, may facilitate Internet fantasy sports games to players within California.”

Dissenting Voices

But some of the state’s tribal operators have expressed concern that an ongoing push to regulate online poker may be swept aside by the sudden focus on DFS. And meanwhile, fantasy sports has its opponents in the legislature, the most vocal of which has been Assemblyman Marc Levine.

This is gambling,” said Levine at a recent hearing. “There is no doubt about it. Let’s not fool ourselves. An entry fee is a wager. Cash prizes are gambling winnings. DFS companies are bookies. Playing these games is sports betting.”

California is the second-biggest DFS market in the US after New York State. Industry analyst Eilers Research has said that the industry generated up to $3.7 billion ($3.4 billion) in entry fees in 2015, with California responsible for 15 percent of this figure.